Short Sales: The "Black Box, White Noise" Conundrum

During the cold war spies for the Soviet Union and the United States had opposite problems.

Their predicament could be summarized with the analogy of the black box and white noise.

The Black Box: American spies complained that there were too few people who knew what was really going on. It was if the dignitaries, the powers that be, met within a black box, made important decisions and few others had access to information.

It was almost impossible to discover what went on inside the black box... yet within those confines everything was decided. The American spies did everything they could to crack the mystery of the black box.

White Noise: Soviet spies were faced with a different problem. Information was everywhere. They had to sift through all of it to try to make sense of the situation. It seemed everyone knew something- the problem was deciding what information proved to be most valid. In science speak, this equation is called "signal to noise."

Short Sales have both conditions.

Agents who work short sales quickly discover that there are cadres of people involved in screening the short sale agent. They will give little information or contradictory information. Yet, there is a black box situation as well... this is what goes on between the loss mitigation specialist, the bank and the investor who considers purchasing the note. The agent and the client are very often left in the dark.

I don't see this changing any time soon- short of changes to the current condition, I advise clients who wish to pursue a short sale to take this into consideration:

1. Keep all of your important financial documents available. They include, among other things: recent bank records, tax returns (past two years), mortgage information, documentation for other assets (401k, stocks, etc.)
2. Stay in constant contact with your agent and the lender.
   
3. Be aware that you'll often hear conflicting information from the lender. Sometimes I wonder if I'll ever hear the same explanation twice.
4. Be prepared for a potentially long process- some short sales can drag on for many months.
5. Know that short sales are not automatic- many of them fail to produce an acceptable offer.
6. Never give false information to the lender or the agent pursuing the short sale.
7. Don't attempt to purchase another property with the intent to stop paying on your existing home... this act "buying and bailing" could lead to severe consequences.

When short sales manage to be accepted the seller is spared from the greater consequence of foreclosure. For most it will have been worth the effort. So... hang in there. Be aware of the white noise and the black box. Be patient, yet persistent ... and wish you all the best fortune through this arduous process.